Our Very Latest Opinion on Markets
We would like to share with you some of our most recent analysis of financial and economic markets, and our views about what's likely to happen next. These can be summarised briefly as follows...
We don't have a clue.
This may seem like a dramatic admission for a financial planner who is charged with looking after many millions of pounds worth of our clients money. However, it isn't a market view that we have arrived at lightly.
Indeed, it has taken many years of experience, study and practice for us to reach the conclusion some years ago that we would be more successful in our money management activities if we stopped trying to make guesses.
There is a great deal of academic theory on the principles of investment that inexorably draws to one conclusion - that accepting that you really don't know which will be the best performing area over the next 12 months is one of the most important steps to becoming a successful investor.
For evidence of this, have a look at the chart below, which ranks the different investment sectors by performance over recent years. Each colour represents a different 'asset class', including shares, bonds and property investments of different types. Your mission, should you choose to accept it, is to suggest which colours are likely to be at the top of the chart at the end of next year.
Would you feel that trying to make such a prediction has about the same chance of success as picking the winner of the 2:30 at Newmarket? Yet this is precisely the activity that many money managers spend most of their time doing. You may agree with us that there has to be a better way.
And there is.
The research shows that creating a carefully balanced portfolio of broadly uncorrelated assets and then re-balancing them periodically as markets move does produce satisfactory returns over time with significantly reduced investment risk. This is the process that we follow, and recent months of stock market volatility have given us the opportunity of assessing whether it works in practice.
The good news is that, whilst this strategy does not avoid losses altogether, it has proven robust in generating above average returns in the good times whilst protecting against heavy losses when things are less certain.
If you are interested in the theory behind the work that we do we will be very pleased to recommend some heavy reading. If on the other hand you are just like our other clients in that you want to have the maximum probability of being able to achieve your goals without taking excessive risks, then we would suggest that you should be very pleased with the results that we are achieving for you.